DS News - Digital Archives

WILL THIS MARKET 'BOTTOM' STICK? During a CoreLogic economic webinar presented in early May, the company's chief economist Mark Fleming, Ph.D., was asked if the housing market hit bottom and whether it will stick, as reports seem to speculate. Apparently, the market in recent years was thought to have hit bottom twice before, but those presumptions proved premature. Fleming noted this happened in 2010 when prices peaked and year-over-year growth rate was positive. This was also a time when the homebuyer tax credit was available. House prices stabilized, but the problem with that, Fleming explained, is that when the tax credit expired, demand disappeared and prices continued to fall. The market again saw some stabilization in the beginning of 2011, Fleming said, but the economy fell off the rail with the European debt crises, the Japanese earthquakes, and our own debt ceiling debate. Then, Fleming said, consumer confidence crashed, everyone stopped wanting to buy, demand went down, and prices declined again. As for whether or not this time it truly is a bottom, it partly depends on unpredictable events. "The longer we go now without any major shock, the more strength this recovery will have and the more it will be able to sustain without significant detrimental impact any shocks that might come," Fleming said. "So time then is one of our most helpful forces at the moment." While uncertainty seems to surround whether or not the market has truly hit bottom, one trend does appear to be more stable. With recent reports of declining delinquencies, Fleming said he expects to continue to see fewer delinquencies and foreclosure starts in coming years. This is partly due to the performance of loans originated between 2009 and 2011, which Fleming explained benefit from tighter underwriting standards compared to earlier loans. Recently, CoreLogic reported delinquencies were down with the share of borrowers nationally that were more than 90 days late on their mortgage payment, including homes in foreclosure and REO, dropping to 7 percent in March 2012 from 7.5 percent a year earlier. As for foreclosure inventory, Fleming pointed out that a migration took place where the concentration of states posting higher foreclosure rates moved from the West Coast to eastern and southeastern states, such as New Jersey, New York, and Florida. During the webinar, Fleming also provided some clarification on house price indexes and explained that indexes reporting year-over-year prices showing negative numbers amid positive home sales reports might have to do with what was happening a year ago. He said sometimes negative numbers are negative because of a really good spring season a year ago. KNOW THIS As of May 1, a total of 221 Dodd-Frank rulemaking requirement deadlines have passed. Of these, 148 (67%) missed the deadline altogether, while 73 (33%) met the deadline with finalized rules. 42 HUD SECRETARY PRESENTS DEPARTMENT'S BUDGET FOR FY 2013 Before a senate subcommittee in April, HUD Secretary Shaun Donovan revealed details of his department's 2013 fiscal year budget and presented a breakdown on what programs the funds will help. Overall, HUD's budget for 2013 provides $44.8 billion for housing programs, an increase of 3.2 percent or $1.4 billion compared to 2012. However, Donovan further explained that the program funding level is offset by $9.4 billion in projected Federal Housing Administration (FHA) and Ginnie Mae receipts, which means the budget is actually $35.4 billion, or 7.3 percent below the fiscal year 2012 level of $38.2 billion. "The budget reflects the reality that we cannot create an economy built to last without taking responsibility for our deficit," said Donovan. Overall, 83 percent of HUD's total budget for 2013 will go towards providing rental assistance to more than 5.4 million residents of HUD-subsidized housing, including public housing and HUD grants to homeless assistance programs. The budget will also provide $55 million in housing counseling to assist 185,000 low-to moderate-income families and provide training to more than 4,800 counselors. HUD also requested $400 billion in loan guarantee authority for the Mutual Mortgage Insurance Fund to provide a projected 0.8 million single-family mortgages. Another $25 billion was requested for the General and Special Risk Insurance Fund, which is expected to provide 156,000 units in multifamily housing properties and about 80,600 beds in healthcare facilities. "At a time when liquidity and access were needed most in the housing market to facilitate the recovery of the broader economy, FHA stepped in to ensure that mortgage capital continued to flow," said Donovan. "However, FHA's expanded role is and should be temporary." Donovan also added that FHA's market share is shrinking for the first time since 2006, a sign that private capital is returning to the mortgage market. Underscoring the important role of the FHA for borrowers that "the conventional market does not adequately serve," Donovan said more than 30 percent of all FHA-insured homebuyers are minorities, and over half of all African Americans and 45 percent of Hispanics who bought a home last year were financed through FHA.

• Cover